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Wednesday, 23 April 2014

Fair tolling for New York? Not perfect, but a step in the right direction

Let's start out by not painting a picture of utopia.

Congestion in New York City is not going to be solved by tolling a few of the East River Bridges or putting a cordon to the north of 60th Street.

Move NY fair tolling plan

There are going to be some distortions in economic activity because of the placement of the cordon on 60th Street, and by the adding of tolls on some crossings.

Roads aren't going to be better managed, nor is public transit going to be better managed just because New York City gets some more money from motorists. There are more fundamental governance, incentive and management issues with all of that infrastructure.

However, on balance the plan by Move NY called "Fair Tolling" will make a positive difference. It will reduce congestion, it will encourage more use of public transit, walking and cycling, it will improve mobility to those locations to the east with higher tolls, and will improve air quality.

No other single policy measure can have such a positive difference on New York transport and the environment, whilst also having positive impacts on the economy. It wont be sufficient, but it will be a very positive change indeed. There will be less car use around downtown Manhatten, and possibly a little more on the periphery where tolls will reduce. There will be more efficient use of crossings, as some motorists don't divert to avoid tolls. Buses, trucks and taxis should have much easier trips, and there will be more public transit usage. There may even be more cycling if the infrastructure is up to it.

There will, of course, be more money to spend on transport infrastructure, but it will take some convincing for enough people to be willing to pay for something they don't pay for now. That's what needs to happen in the coming years. Years I say, because it takes patience and time, and for it to be known that this isn't going to go away. There may be one or two more failed attempts politically at pursuing similar reforms, but the logic about doing so is difficult to undermine completely. At best opponents don't like it because they don't believe they can convince voters to like it.

So let's go through some of the key issues.

Price setting

It is difficult to argue against the figures put forward in the plan, but beyond that there needs to be three key principles:

1. Congestion targeting: Whilst the plan as it stands sets similar tolls across the East River, the scope exists to make some key changes over time to target congestion. That should mean tolls should be allowed to be different at different tolling points at different times of day, and in different directions. That shouldn't happen straight away. Indeed, for the first two years I'd do nothing more than inflation index the tolls, but by then sufficient observations should exist to decide if there should be more disaggregation of tolls. That means raising tolls at some points between certain periods, but having countervailing reductions at other times when free flow conditions exist. Some will say this is complicated, but most motorists do not use more than one or two of the points that will be tolled every day. There is no more need for them to know about different toll prices on different routes than you need to know about the price for flying from New York to Phoenix when you only ever fly to Chicago and Los Angeles.

To target congestion means ...

2. Performance based pricing: As much as New York will be driven by revenue rather than congestion or pollution to introduce "fair tolling", it should be based on performance, similar to how Singapore has a sophisticated basis for setting prices. What that should mean is congestion targeting, as described above, would happen based on some core metrics for levels of service. The most congested routes would be charged the most at the times they are congested, which will encourage some motorists to choose other less congested routes, or other modes. Conversely, the least congested should be discounted. This should be based on published criteria and see changes perhaps every six months, although dynamic pricing would be possible it is perhaps better for motorists to know before they hop in their cars how much it will cost, rather than when they reach a tolled crossing point (at which point the price may have changed).

3. Independent price setting: The US is never very good at setting demarcations between political authority and private enterprise. The idea that something can be owned by the public sector, but be outside direct political control is seen to be undemocratic, but it can actually mean that there is merit in maintaining public ownership of something that is managed professionally. In this case, price setting should be based on objective analysis and determined by a tolled crossings authority board. It should be explicitly prohibited for there to be political direction about that, but the prices should be set according to congestion performance criteria, subject to meeting minimum revenue requirements to cover the maintenance and capital costs of the tolled infrastructure. Then it wont be subject to the vagaries of politicians wanting to fiddle with a system that should be technocratic. The details of setting prices that are, quasi-market, should not be driven by politics, otherwise New York will be back to tolls set according to political expendiencies and favours, none of which does the city as a whole any favours.

Minimise discounts and exemptions

There will be a long list of people seeking special status, but those deserving of it are few. Emergency vehicles and buses should be the start and end of the list, but I expect calls for vehicles owned by disabled people to be included, taxis and residents of Manhatten. There are likely to be calls for low emission vehicles to be discounted.

For any of these to go forward there needs to be an easy to verify, difficult to defraud, means of identifying those eligible for whatever discount or exemption that applies. I'd argue that emergency vehicles and commuter buses should be exempt, but that's it. There could be a discount for ultra low emission vehicles and those of disabled drivers, but only on registration for that discount, and a process to verify qualification for the discount.

but don't be afraid of introducing targeted discounts to make the transition easier

Discounts are better than exemptions, because discounts can be varied or withdrawn. So if one issue is that some people would be particularly worse off with the plan, then allowing selective discounts for a fixed period, either according to easily identified groups, or even on some toll crossings, would be one way to move forward. For example, the tolls on the untolled East River Crossings could be phased in, being half the price of other crossings for one year, and then full price the next year. Another example, which I would loathe to introduce, would be to allow for a refund scheme for some types of workers who are thought of as being unduly affected.

However, all such discounts could subsequently be phased out when tolling becomes targeted based on demand, and if bus services are improved to provide a reasonable alternative. Note that Stockholm introduced a temporary 100% discount for "green vehicles" which is time limited, because the Congestion Tax there is about congestion, not about emissions - although it is positive for both. Time limiting any "social equity" discounts may be an option. However, don't forget that simply having different prices for different times of the day may be able to address some such issues.

think how else it can be made easier for small businesses near the charging boundary on Manhatten

If you owned a retail business and was told that one day your customers from the north would have to pay to drive to get to your business, but your competition two blocks away didn't face that, you'd oppose it. So think about how such businesses can get tax advantages to soften the effect, or spend money on the infrastructure in the vicinity to make it easier. Remember the cordon boundary at 60th Street is artificial, but there needs to be one somewhere. Think creatively as to how to address this, it can involve traffic management, parking, taxes and infrastructure development, or find a way to introduce a staggered boundary ( a detail, but an important one).

Make it easy to use and understand

That is why, at first, prices need to be simple. It needs to be very easy to set up an account, and very easy to pay for those without an account. A wide range of payment methods need to be available, and it should be possible to pay online, by SMS or by phone. By no means should it be an excuse that it was difficult to pay.

Before implementing this plan, the existing tolled crossings should have toll booths eliminated, and replaced with the system that would be in place with fair tolling. Besides easing congestion and making a small contribution to reducing emissions, it would demonstrate how fully electronic free flow tolling works and provide a test for the enforcement systems that will need to be in place. EZ-Pass is the easy way to do it, but it should operate at normal highway speeds.

The former should be easy, it should show how modern tolling actually works, including stress testing occasional user payments, so people can prepay or postpay for one off usage, rather than get an account.

The latter is important, as a lot of people are going to be doing that, and so it has to work. The last thing New York needs is thousands of motorists complaining they couldn't pay.

Test and robustly implement enforcement

Enforcement is going to be critical with electronic free flow tolling, and that means accurately reading number plates and having a combination of soft and hard enforcement in the initial months. First time offenders should be given the option of just paying the toll and registering an account, but repeat offenders should be fines progressively more. Part of this will be ensuring that out of state number plates can be pursued robustly. Credibility for free flow tolling depends on users knowing that failure to pay will cost them, so when electronic free flow is introduced on the existing crossings, it should be the chance to get the compliance policy and procedures finalised. Bear in mind compliance is what you want - far better to have people pay than to chase them up and fine them, even though the latter might generate more revenue.

Work with PANYNJ to implement free flow tolling on its crossings

It would be truly silly to implement this plan without getting at least the George Washington Bridge and Lincoln and Holland Tunnels converted to electronic free flow tolling as well. That should be part of the overall plan to improve the user experience, and it will help manage congestion better. Continuing to have manual tolling on such congested urban crossings imposes enormous time penalty costs, besides wasting fuel and adding to pollution.

What to do with the money?

Whilst as much time and effort can be spent on debating how to use net revenues from the plan, I am not going to focus on that. For depending on your political persuasion you can use the money for public transit and active modes of transport, you can use it to upgrade roads, you can use to reduce other taxes or charges on motorists, public transit users or anyone else. Those arguments are important, and I suspect over time the mix will change, but beyond two key points I am not going to discuss that. Those points are:

- Some net revenue must go on fixing roads. Motorists who pay must see that at least part of the money they are paying is returned in improved conditions, even if it is simple unsexy measures like high quality resurfacing and better managed intersections.

- Some net revenue should be used to offset those disadvantaged by the limitations of the plan. By that I mean the practical, but economically inefficient location of a cordon on Manhatten. Measures to offer residents' discounts, tax credits for certain businesses. should be considered. Because efficient road pricing wouldn't produce such distortions, it is only appropriate that those particularly disadvantaged by this solution get some offsetting compensation. In the long term, the answer is for all vehicles to be charged on distance, as well as location and time of day, but that isn't going to happen for some time. When it does, the need for offsetting measures can be eliminated.

Where to from here?

It's lobbying time, and it is about convincing all those interested in the future of NYC that there are merits in the plan, whether they be in reducing congestion and reducing pollution, or in helping to fix roads and public transport.

There is scope to adjust parts of the plan to address some concerns, but the fundamentals should remain:

- Charging all crossings on an objectively defined equitable basis;

- Setting prices based on optimising network use;

- Using net revenues to upgrade roads for motorists, cyclists and pedestrians, as well as public transit.

Even without the fiscal crisis for the city, the case for reform is overwhelming, as the status quo is irrational. It is time for Move NY to ensure it can answer its critics and to respond to the long list of tired old arguments against tolling, and so to turn the argument around.

It isn't anti-car, it isn't about introducing a new tax, it is about better management of existing road space in a way that will raise money to improve transport infrastructure. I'd say those who don't want more taxes should argue that other taxes can be cut as well as introducing this plan. I'd say those who believe in helping the poor can argue that net revenue can be channeled into public transit and there can be discount options to help the most heavily affected users.

Consider that some of the biggest allies should be those currently facing the most expensive crossings who will pay less, like users of the Verrazano-Narrows Bridge. Yes, you see "fair tolling" needs to bring on board those who pay now, those who will pay less and those will will pay the same, but consider it is unreasonable for others to cross the East River and pay nothing.

Finally, New York State needs to think about revenues and taxes on motorists more generally. Is it going to maintain fuel tax as it is and increase it to meet inflation and fuel efficiency, or will it use its platform of distance based truck taxation to modernise and move towards a vehicle mileage tax more generally, or will it simply use more tolls? The Move NY plan would be compatible with all of these, but would suggest that tolls or distance based charging may be the way of the future. However, there is little sign that at the state level, New York has advanced its thinking politically at all on this, hopefully the city can, if a way can be found to hook the recently elected Mayor onto the proposal's merits.

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What is road pricing?

Road pricing is any system that directly charges motorists for the use of a road or network of roads. Traditionally it has meant tolls on single routes, particularly crossings such as bridges or tunnels. More recently it also includes area, cordon and zone pricing of urban areas, and distance and time based charging of whole networks. It does not include fuel or tyre taxes, or taxes on ownership or purchase of road vehicles.